Cytonn CEO Edwin Dande while appearing before the Public Petitions Committee at Parliament Buildings on February 21, 2023.
Cytonn Investments founder Edwin Dande has been accused of hiring armed individuals to forcibly take possession of a 3.99-acre land in Kilimani, which is at the centre of a liquidation battle before the courts.
In a meeting with creditors on Thursday, Official Receiver Mark Gakuru told attendees that the armed men kicked out security guards hired by his office to protect the 3.99-acre land situated at the junction of Elgeyo Marakwet and Argwings Kodhek roads.
The group, Mr Gakuru said, kicked out security guards hired by his office after holding them hostage at gunpoint.
On Saturday, Mr Dande denied planning or participating in any armed takeover of the Kilimani property, and that the alleged incident sounds far-fetched.
“The Official Receiver has alleged that I and others hired armed individuals to forcibly take possession of the Kilimani property in June. I am not aware of this incident and find it implausible that armed individuals were hired, and lives of public officers threatened without a police report being filed,” Mr Dande told Nation.Africa.
Just seven years before the alleged incident, Cytonn Investments had mesmerised investors, financiers, partners and the public at large with its plans to employ cutting-edge architectural designs in putting up a 35-floor triplex tower on the land, after getting approval from the Nairobi County government.
It seemed plausible, as Cytonn Integrated Project LLP was at the time also constructing 477 houses on a 4.7-acre land in Ruaka, dubbed the Alma, and things were moving relatively smoothly there.
But in 2018, the county government retracted its approvals and Cytonn opted to put up the property for sale.
To finance the real estate arm, the firm introduced Cytonn High Yields Solutions (CHYS) and Cytonn Real Estate Project Notes (CPN).
The two products pooled money from individuals and promised to return the investments after some time with attractive interest. The money would be invested in the real estate projects.
Of course, there was a high risk if the real estate project failed to take off.
The worst happened, and hundreds of investors now risk losing over Sh8.2 billion that they pumped into CHYS and CPN.
So far, the Official Receiver has received debt claims totalling Sh9.4 billion.
This includes two secured creditors claiming Sh1.176 billion, and over 1,000 unsecured creditors who are investors claiming Sh8.236 billion.
The Insolvency Act provides that secured creditors be paid first when companies are folded.
CHYS and CPN were placed under liquidation on January 6, 2023 and the Official Receiver was appointed as the liquidator to realise the assets of the two entities and recover investors’ funds.
However, because CHYS and CPN did not have any assets of their own, Mr Gakuru was forced into seizing and selling assets acquired using money from the two Cytonn scions, even if they are registered in the names of different entities.
That is how the Official Receiver laid claim to the Kilimani properties, armed with the blessing of Justice Alfred Mabeya who in January 2023 allowed Mr Gakuru to trace such assets and use their sale proceeds to relieve the pain of thousands of investors.
In November 2023, Justice Mabeya issued a specific order vesting the Kilimani property in the Official Receiver’s custody despite opposition from Cytonn.
According to the Official Receiver, Cytonn Investments founder Edwin Dande based his alleged orchestration of the June 2024 takeover of the Kilimani property on the fact that there is an ongoing appeal, which suspended the execution of the High Court’s liquidation order.
Currently, 29 court cases have stalled the liquidation of Cytonn. There are 19 in the High Court and 10 in the Court of Appeal.
Mr Gakuru told creditors that in June, officers at Kilimani police station declined to record a complaint by the Official Receiver, who opted to return to the courts for interpretation of the Court of Appeal decision.
The courts agreed with Mr Gakuru that the status quo order only affected the sale of assets, but that the Official Receiver maintained the right to possession. That allowed Mr Gakuru’s office to take possession of the Kilimani land.
On Thursday, October 24, in an update to creditors, the Official Receiver revealed that Mr Dande has refused to surrender five title deeds, a move that has now slowed down another investigation that could yield more bad news for the already hit investors.
Mr Gakuru’s team told 583 attendees of the virtual meeting that much like the Kilimani land, many of the properties are undeveloped, and that there is suspicion that the Cytonn entities overstated the true value of several parcels of land meant to be sold.
Other title deeds Mr Dande is yet to surrender are for projects dubbed Taraji Heights (Ruaka), The Ridge (Ridgeways), Riverrun (Ruiru), Newtown (Athi River) and Applewood (Karen).
On its website, Cytonn Investments last placed a valuation of the properties in 2021. The 3.9-acre Kilimani land was tagged at Sh1.4 billion. Athi River land (1,000 acres) was at Sh4.4 billion, Karen (10.4 acres) at Sh894 million and the Ruaka one (three acres) at Sh1.5 billion.
Mr Dande told the Nation that he is not holding any title deeds, but maintained that the Official Receiver has no right to claim ownership documents registered in the names of companies that are not undergoing any liquidation proceedings or processes.
“Importantly, the five titles mentioned belong to solvent entities not under the Official Receiver’s jurisdiction. The Court of Appeal issued stay orders on the vesting orders granted by Justice Mabeya on November 30, 2023, on December 27, 2023. Consequently, the Official Receiver lacks authority to request the title deeds or manage these properties in any capacity,” Mr Dande told Nation.Africa.
The Official Receiver now holds that the properties’ values may have been inflated, as most of them are undeveloped.
The Ruiru property is 100 acres but Cytonn’s share is 40.43acres. The Cytonn website valued the 100 acres at Sh2.113 billion. This means that Cytonn’s portion was worth Sh845 million as per the valuation on the website.
In January 2023, Justice Mabeya also vested the Riverrun property in the Official Receiver’s custody.
While the execution of the liquidation was suspended, the High Court held that the Official Receiver’s office was legally in possession pending the determination of the appeal by Cytonn.
This meant Mr Gakuru was allowed to have possession of the affected properties and their ownership documents.
The Official Receiver intends to do a valuation of the affected Cytonn properties to ascertain the valuations given by Cytonn for the land parcels, and get a true picture of what creditors are likely to recover.
KCB and SBM Banks are the only secured creditors. This means that their debts are tied to specific assets that were used as collateral for loans.
KCB is owed $3.2 million (Sh425 million) by Cytonn, arising from a loan it extended for the construction of the Cysuites Apartment Hotel.
Cysuites has 6 blocks with serviced apartments and styled as a hotel.
Cytonn collects an estimated Sh144 million annually from Cysuites.
The property is registered to Wasini Resorts Ltd. Cytonn Investment Partners 20 LLP purchased 1 million shares in Wasini Resorts Ltd using funds from CHYS and CPN.
Despite the payments being made, the ownership changes were not registered. KCB has, however, acknowledged that Cytonn Investment Partners 20 LLP made full payment for the shares in Wasini Resorts Ltd.
KCB issued a notice of appointment of a receiver manager to Cytonn after the default of the loan. Cytonn sued to stop the appointment, and the case is pending in court.
SBM Bank is claiming Sh750.7 million from Cytonn Real Estate, which was secured with the title deed for a residential property dubbed the Alma, in Ruaka.
The lender is to meet with people who have bought homes at the Alma as part of plans to audit purchases in the Ruaka development.
“Walker Kontos is representing SBM. That meeting is aimed at auditing Alma purchases to establish who paid what and where, because all purchases were meant to be paid at SBM Bank,” Judy Mugo, an assistant Official Receiver told creditors in the virtual meeting on Thursday.
The development was to have 477 apartments for sale. During the creditors’ meeting, the Official Receiver revealed that 306 units were completed and some already sold or rented.
Buyers with ownership documents or evidence of payment for their units will not be affected by Cytonn’s woes.
Those with no documents to show their purchase or evidence of payment will be listed among unsecured creditors to be considered under the liquidation of CHYS and CPN.
The Official Receiver also intends to sell a 12.5 per cent stake that another Cytonn entity owns in Superior Homes, the developer of Athi River’s Greenpark estate.
Cytonn Investment Partners Fifteen LLP purchased 25 million shares in the company for Sh250 million that it sourced from the CHYS.
Mr Gakuru told investors on Thursday that Mr Dande had initially agreed to sale of the shares after valuation.
Ian Anderson, the Superior Homes majority shareholder, paid Sh25 million to law firm Bowmans for the valuation, which was to be done by one of the big four accounting firms – Ernst & Young, Deloitte, PwC or KPMG.
Mr Gakuru told creditors that Mr Dande then changed tune and claimed that there was collusion between the Official Receiver and Superior Homes to undervalue the shares.
“The first time we had a meeting, Dande said the shares were worth Sh275 million. Ian Anderson and Shiv Arora paid Sh25 million towards valuation. Ian Anderson who is the biggest shareholder agreed that he would buy the shares after valuation. The people doing the valuation are the big four accounting firms. The reason we haven’t arrived at a solution is because of Dande’s flip-flopping,” Mr Gakuru said.
Mr Dande has sued to stop the shares sale.
At the creditors’ meeting, advocate Anthony Leshan claimed to be a member of a Creditors Restructuring Committee (CRC) which is against the liquidation.
There was confusion on whether there are thousands of people behind the CRC.
But Mr Gakuru held that there is no such committee under law, as the Insolvency Act only provides for a Creditors Committee. Two Creditors Committees have been formed, one each for CHYS and CPN.
He added that records indicate that Mr Leshan filled proxy forms for two individuals only.
Mr Leshan responded by stating that the two individuals he represents are him and his mother.
He accused the Official Receiver of refusing to meet, but Mr Gakuru held that a meeting can be arranged but only as a creditor, not as a member of the CRC.
